18 September 2018

Kenya: Government to Cut Budget to Sh2.9tn, Key Sectors to Lose

Photo: Salaton Njau/Daily Nation
National Treasury Cabinet Secretary Henry Rotich on his way to Parliament to present the 2018/2019 budget statement on June 14, 2018.

The government has proposed to slash its Sh3.026 trillion budget for the current financial year by Sh55 billion, a move that will affect key sectors of the economy.

The reduction is contained in the supplementary budget estimates prepared by National Treasury Cabinet Secretary Henry Rotich and tabled during a special sitting of the National Assembly on Tuesday.

HUGE DEFICIT

If adopted by the MPs on Thursday - during a second special sitting, the budget will reduce to Sh2.971 trillion as the government fights to bridge a huge deficit because it is only able to raise about Sh1.6 trillion.

The proposed cuts will be considered on Wednesday by the Budget and Appropriations Committee chaired by Kikuyu MP Kimani Ichung'wah, before the report is tabled in the House on Thursday.

Some of the biggest losers are the Devolution ministry (Sh6 billion), National Treasury (Sh6 billion), the Information and Communication Technology ministry (Sh5.9 billion) and the Energy docket (Sh2.6 billion).

The Infrastructure ministry is set to lose Sh8.7 billion while the Foreign Affairs ministry will lose Sh179.5 million.

The Sh36 billion allocated to Parliament will also reduce by Sh5 billion while the National Lands Commission (NLC) will lose Sh50.4 million.

The education sector was not left behind. The Vocational and Technical Training has had its budget slashed by Sh1.3 billion, University Education and Research by Sh1.07 billion, Early Learning and Basic Education by Sh487.3 million and the Teachers Service Commission (TSC) by Sh67.7 million.

Mr Rotich said in his statement to the MPs that the government has to make prudent policy decisions so that unwarranted debt burden is not imposed on future generations.

"Over the medium term, the national government's borrowing shall be used only for the purposes of financing development expenditure and not for recurrent expenditure," he said, despite accusations by critics over the spiraling corruption in the public institutions.

SURVIVORS

As the other sectors suffered cuts, the Sh32 billion allocated to the National Intelligence Service (NIS) remained intact and so was the case with Sh2.9 billion for the Ethics and Anti-Corruption Commission( EACC).

The Auditor General's office lost Sh110 million and the Controller of Budget Sh15 million.

The cuts are on the backdrop of difficulties by the country to meet its financial obligations, with its foreign debt surpassing the Sh5.1 trillion mark as at June 30, 2017.

In a bid to cure the growing debt, the International Monetary Fund (IMF) has proposed a slowdown on the borrowing appetite and a funding of the budget from within, a move that brought on the 16 per cent Value Added Tax (VAT) on fuel products.

President Uhuru Kenyatta want the tax rate halved.

Though the IMF move has been opposed by Kenyans and political leaders, President Kenyatta recently said there are no option so Kenyans must persevere to gain in future.

A section of MPs are, however, apprehensive that the gains may never be realised with increased looting of public resources.

Interestingly, the Housing docket lost Sh80 million despite being part of the president's Big Four Agenda for affordable housing for Kenyans as he leaves office in 2022.

DEVELOPMENT

Mr Rotich has promised to ensure that up to 30 percent of the national budget is allocated to development.

He said that all internal and external borrowing will be restricted to the funding of development projects.

Compensation of employees - benefits and allowances - will now be restricted to 35 percent of the national budget.

"We have made adjustments to the programmes and votes as a result of amendments to the Finance Bill, 2018. Some of the adjustments exceed 10 percent. We are, in this regard, requesting special approval of the expenditure adjustments," he said.

According to the CS, going forward, the government will come up with measures to realise the 35 percent threshold provided for in Section 26 (1) (a) of the Public Finance Management Regulations, 2015.

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